Fed Resumes MLII Sales to Strong Demand

The Federal Reserve Bank of New York (FRBNY) resumed sales from its Maiden Lane II portfolio last week to strong investor interest, which should serve as a positive across the scope of structured finance, according to Deutsche Bank Securities analysts.

Deutsche analysts reported that on the back of last Thursday's $7 billion sale by the Fed, the bank’s consumer ABS, CDO/CLO and private-label residential trading desks all noticed strong levels of interest and tighter spreads.

The FRBNY sold the $7 billion portfolio of non-agency RMBS to Credit Suisse after soliciting bids from a number of dealers. Unconfirmed reports indicate the purchase price was slightly over $3 billion, although the Fed will not release the actual purchase price until April.

“We interpret the sale as a positive for the entire structured market in that it highlights both a significant amount of investable capital still on the sidelines and partial validation that at least for the time being the probability of tail risk scenarios have been reduced,” Deutsch analysts said.

They also noted that the latest sale will also reduce the ML II portfolio by a third and provides “a template for a much less disruptive process to sell the remaining bonds.”

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